The Morals of the Marketplace

Lawrence E. Mitchell

Case Western Reserve University School of Law

Stanford Law & Policy Review, Vol. 20
GWU Legal Studies Research Paper No. 1129340

This brief essay explores the economic and social legitimacy of modern financial markets, with particular attention to the relationship between risk and responsibility. Using the markets for corporate common stock and mortgaged-backed securities as illustrations, and modern portfolio theory as its theoretical base, it raises questions about the links between capital markets and the real economy, and their effects upon each other. It concludes that capital markets largely have become disconnected from the real economy and have created a context in which finance finances finance rather than production.

This theoretical essay introduces a larger empirical project in progress in which I am attempting to understand in detail and nuance the relationships between capital markets and the formation of productive capital.

Number of Pages in PDF File: 32

Keywords: finance, capital, stock, CAPM, portfolio theory, responsibility, risk, Graham, Dodd, Markowitz, Sharpe, Lintner, MBOs, CDOs, mortgage backed securities, collateralized debt obligations, stock, common stock, portfolio, securities, corporations, mortgage, real economy, production,

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Date posted: May 6, 2008 ; Last revised: January 10, 2009

Suggested Citation

Mitchell, Lawrence E., The Morals of the Marketplace. Stanford Law & Policy Review, Vol. 20; GWU Legal Studies Research Paper No. 1129340. Available at SSRN: http://ssrn.com/abstract=1129340

Contact Information

Lawrence E. Mitchell (Contact Author)
Case Western Reserve University School of Law ( email )
11075 East Boulevard
Cleveland, OH 44106-7148
United States
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